CHS Audit-What Auditor Wants?

It shall be the responsibility of the Managing Committee of co-operative housing societies (CHS) to get the Accounts Audited within a period of six months from the closure of financial year and in any case before issuance of Notice of the holding of the Annual General Body Meeting. The Society shall appoint the Statutory Auditor in its General Body Meeting from the panel of Auditors approved by State Govt. The Secretary of the Society shall produce all the books, registers, records before the Statutory Auditor and provide him such information as may be required by him for the conduct of the Audit of the Accounts of the Society.

In co-operative housing societies there is always a paucity of trained resources, lack of adequate knowledge of processes and the provision of laws. Most of the CHS therefore faces difficulties in getting their accounts audited. This article tries to explain which records and information to be produced to the auditor and how to face the audit.

Broad Audit Areas

Financial statements

Financial statements of CHS includes Income and Expenditure account, Balance Sheet, Receipt and Payment Account, Notes to accounts. The auditor has to report whether the financial statements are true and correct and free from material misstatements.
It is a misconception amongst the CHS that the auditors prepares/ finalizes the accounts and financial statements. Preparation and presentation of financial statements is the responsibility of the managing committee (MC). In case of lack of expertise in the society, MC may take the help of experts. Getting basic training about concepts of financial statements helps a lot.

Compliance to Co-operative law

Compliances to co-operative law is an important aspect of CHS Audit. The co-operative law as applicable to CHS includes The Maharashtra Co-operative Societies Act, The Maharashtra Co-operative Societies Rules, Model Bye laws of the society, various Circulars and notification issued by the Co-operative Department from time to time. The Managing Committee members shall go through the model bye-laws at least twice and see that their CHS complies the same. Few societies are yet to adopt Model bye-laws published by Co-operative Department.

Administration and Management of the society

The audit also encompasses to test efficiency and effectiveness of the management of the society. The audit memo includes various aspects of management and administration of the society on which the auditor has to state the facts based on his audit exercise and give his opinion/suggestions. The bottom line is “to protect the interest of the stakeholders”.

List of Records and information to be produced for audit

1. Complete set of financial statements
2. Books of accounts- Cashbook, bank book, Journal, copies of bills and receipts issued to members/ non- members, Bank statements, Vouchers and bills of expenses, etc.
3. Balance confirmations from Members
4. Bank reconciliation statements.
5. Balance confirmation statement from Banks, creditors and other debtors
6. Bank interest certificates, TDS certificates (if any) in form 16A
7. Statutory registers- Members’ Register Form I, Shares Register Form J, managing committee meetings and AGM minute book, fixed assets (dead stock) register, Nomination register, Investments register, Audit rectification report Form O, Shares certificates issued counterfoils, Admission of new member documents, Conveyance deed copy, AMC and other important contracts documents
8. Statutory compliance documents- Documents related to Income tax, TDS, Profession tax, GST compliance.
9. list of active and non-active members.
10. Management responsibility statement
(The list is not exhaustive and is illustrative in nature)

An Auditor is always a friend, philosopher and guide. The statute assigned him a role to give his opinion on the financial statements, general management and administration of the society. Even If your audit grade is “A”, still there are certain observations and suggestions in your audit report, do not ignore it. Do not feel bad when the auditor gives you a grade other than “A”. There is always a scope for improvement. Annual audit shall be self-evaluation episode.